By Masumi Suga and Emi Urabe
(Bloomberg) — Japan Marine United Corp., Japan’s No. 2 shipbuilder, said demand for offshore supply and support vessels has stalled after crude oil plunged to a six-year low.
The company, formed by the merger of shipbuilding units at steelmaker JFE Holdings Inc. and IHI Corp., is the sole Japanese producer of anchor-handling tugs for drilling rigs and platform supply vessels.
Interest in these vessels from customers has become quiet, JMU President Shinjiro Mishima said yesterday in an interview at its Tokyo headquarters. “They have changed to a ‘wait-and-see stance.’ We started to see this trend at the end of last year and into the beginning of this year.”
JMU and rivals began to see demand slow as excess global supply saw oil prices more than halve since June. Brazil’s Petroleo Brasileiro SA, the biggest deepwater producer, is reviewing its $220 billion, five-year investment plan.
While the recent oil plunge has risked new orders for offshore vessels, the outlook of tankers carrying crude oil — one of JMU’s three main products, along with bulk carriers and container ships — is brighter.
Mishima predicts the lower cost of crude oil will likely increase sea trade to China and Japan. The shipping market, still in excess supply, is improving as China takes advantage of lower costs to increase storage of oil.
The timing of replacement of oil tankers “could come at a faster pace,” Mishima said. Given that it costs about 10 billion yen ($85 million) to build a VLCC, or very large crude carrier, customers may not make quick decisions on orders, he said.
Mishima, 65, headed JFE’s shipbuilding arm prior to the merger and the enlarged unit for almost the past seven years. While the merger has enabled JMU to expand offerings such as liquefied natural gas tankers, he said the size of the company isn’t enough to compete with bigger rivals in South Korea.
JMU will target sales of 500 billion yen a year from the current level of 300-350 billion yen to boost competitiveness by any measures, including alliances with domestic shipbuilders.
Copyright 2015 Bloomberg.